ALESTRA, S. de R.L. de C.V.

Transcription

1 ˆ200FCwd2g2iG1!Sg:Š 200FCwd2g2iG1!Sg nerdoc NER shaup0ap 25-Aug :23 EST TX 1 3* UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934 For the six-month period ended June 30, 2011 Commission File Number ALESTRA, S. de R.L. de C.V. (Translation of Registrant s name into English) Ave. Lázaro Cárdenas No. 2321, 9th Floor Col. Residencial San Agustín San Pedro Garza García N.L México (Address of principal executive office) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F Form 40-F Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of Yes No If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

2 ˆ200FCwd2et!P#BVQ\Š 200FCwd2et!P#BVQ FBUAC NER hryse0nd 25-Aug :57 EST TX 2 3* Table Of Contents Cautionary Statement on Forward-Looking Statements 3 Item 1. Management s Discussion and Analysis of Financial Condition and Results of Operations 4 Item 2. Unaudited Condensed Consolidated Financial Statements as of June 30, 2011 and for the six-month period ended June 30, 2010 and 2011 F-1 This Form 6-K consists of a Management s Discussion and Analysis of Financial Condition and Results of Operations and unaudited condensed consolidated financial statements for Alestra, S. de R.L. de C.V. ( Alestra ) and its subsidiaries, Servicios Alestra, S.A. de C.V. ( Servicios Alestra ) and Alestra Telecomunicaciones Inalámbricas, S. de R.L. de C.V. ( Alestra Telecomunicaciones Inalámbricas ), as of June 30, 2011 and for the six-month periods ended June 30, 2010 and Mexican Financial Reporting Standards ( Mexican FRS ) requires that financial information starting from January 1, 2008 be presented in nominal Mexican Pesos ( Pesos or Ps. ), unless otherwise noted for the convenience of the reader. Please note that some figures in this Form 6-K may not sum due to rounding. 2

3 ˆ200FCwd2g2h$tdMgnŠ 200FCwd2g2h$tdMg nerdoc NER shaup0ap 25-Aug :43 EST TX 3 1* HTM IFV 0C In this report, unless the context otherwise requires, the terms we, us, our, our company and ourselves mean Alestra and its subsidiaries, Servicios Alestra and Alestra Telecomunicaciones Inalámbricas. Cautionary Statement on Forward-Looking Statements This report includes or incorporates forward-looking statements, which include statements with respect to our plans, strategies, beliefs and other statements that are not historical facts. These statements are based on our management s assumptions and beliefs in light of the information currently available to them. These assumptions and beliefs include information concerning us, as well as the Mexican economy and telecommunications industry. The assumptions also involve risks and uncertainties which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Potential risks and uncertainties include, without limitation: general economic conditions in Mexico and the United States, and any significant economic or political developments in those countries; the competitive nature of providing long distance, data, internet and local services; changes in our regulatory environment, particularly changes in the regulation of the telecommunications industry; the risks associated with our ability to implement our strategy; customer turnover; technological innovations; our need for substantial capital; interest rate levels; performance of financial markets and our ability to refinance our financial obligations when they become due; our ability to service our debt; limitations on our access to sources of financing on competitive terms; currency exchange rates, including the Peso/U.S. dollar exchange rate; changes in our costs of doing business, including but not limited to costs associated with billing and collection, marketing and sales, and personnel training and travel expenses; and changes in the policies of central banks and/or foreign governments. Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements. In any event, these statements are applicable only as of the date of this Form 6-K, and we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise. See Item 1. Management s Discussion and Analysis of Financial Condition and Results of Operations. 3

4 START PAGE FBUAC NER wernm0nd ˆ200FCwd2et!PvL$Q.Š 200FCwd2et!PvL$Q 25-Aug :57 EST Item 1. Management s Discussion and Analysis of Financial Condition and Results of Operations TX 4 2* The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements as of June 30, 2011 and for the six-month periods ended June 30, 2011 and 2010 and the notes thereto contained elsewhere herein. Six-month period ended June 30, 2011 compared to the six-month period ended June 30, 2010 Revenues Total revenue during the six-month period ended June 30, 2011 was Ps. 2,302.6 million, a 2.7%, or Ps million, increase from the Ps. 2,242.8 million for the six-month period ended June 30, This increase was primarily the result of an increase in our data, internet and local services revenues. Data, Internet and Local Services. During the six-month period ended June 30, 2011, data, internet and local service revenues reached Ps. 1,818.3 million, a 7.8%, or Ps million, increase from Ps. 1,686.2 million for the six-month period ended June 30, The increase in data, internet and local services revenues was primarily due to an increase in revenues from internet-related services, such as virtual private network ( VPN ) and managed services. Our data, internet and local services represented 79.0% of our total revenues during the six-month period ended June 30, 2011, compared to 75.2% during the same period in Long Distance Services. Revenues from our long distance services for the six-month period ended June 30, 2011 decreased 13.0%, or Ps million, to Ps million from Ps million for the six-month period ended June 30, The decrease in long distance revenues was primarily due to lower traffic partially offset by an increase in revenue per minute. The average long distance revenue per minute increased to Ps for the six-month period ended June 30, 2011 from Ps recorded during the sixmonth period ended June 30, Total volume of minutes handled decreased 24.8%, to 672 million in the six-month period ended June 30, 2011 from 893 million minutes for the six-month period ended June 30, The decrease in volume is primarily attributable to less international long distance traffic. As a percentage of total revenues, long distance services revenues represented 21.0% of our total revenues during the six-month period ended June 30, 2011, compared to 24.8% during the same period in Cost of services (excluding depreciation and amortization) Cost of services consists primarily of: fees for leased lines, typically paid on a per-circuit per-month basis primarily to Teléfonos de México S.A.B. de C.V. ( Telmex ) and other last mile access providers; interconnection costs, including local access charges and resale expenses, paid on a per-minute basis primarily to Telmex; and international settlement payments to foreign carriers on a per-minute basis for the completion of international calls originated in Mexico by us. Cost of services decreased 5.1%, or Ps million, to Ps million for the six-month period ended June 30, 2011 from Ps million for the six-month period ended June 30, The reduction in cost of services was primarily the result of a decrease in cost of long distance services. Data, Internet and Local Services. Cost of data, internet and local services increased 8.8%, or Ps million, to Ps million for the six-month period ended June 30, 2011 from Ps million for the six-month period ended June 30, This was primarily due to an increase in revenues from internet-related services, such as VPN and managed services. Long Distance Services. Cost of long distance services decreased 22.1%, or Ps million, to Ps million for the sixmonth period ended June 30, 2011 from Ps million for the six-month period ended June 30, This decrease in cost of long distance services was primarily due to lower interconnection costs resulting from a decrease in the volume of international long distance traffic. 4

5 Gross profit ˆ200FCwd2g2h$vvsg Š 200FCwd2g2h$vvsg nerdoc NER shaup0ap 25-Aug :43 EST TX 5 1* HTM IFV 0C Gross profit is defined as revenues minus cost of services (excluding depreciation and amortization). Gross profit is a non- GAAP financial measure that is not defined under Mexican FRS. We believe that gross profit can be useful in facilitating comparisons of operating performance between periods and with other companies. However, our computation of gross profit is not necessarily comparable to gross profit as reported by other companies because it excludes depreciation and amortization expenses. Though gross profit is a relevant measure of operating performance, it should not be considered as an alternative to operating income (determined in accordance with Mexican FRS, as an indication of our financial performance), or an indication of resources generated from operating activities (determined in accordance with Mexican FRS, as a measure of our liquidity), nor is it indicative of funds available to meet our cash needs. Gross profit increased 6.6%, to Ps. 1,588.8 million for the six-month period ended June 30, 2011 from Ps. 1,490.3 million for the six-month period ended June 30, Our gross profit increased primarily due to the increase in data, internet and local services gross profit. Data, Internet and Local Services. Our data, internet and local services gross profit increased 7.5%, or Ps million, to Ps. 1,368.6 million for the six-month period ended June 30, 2011 from Ps. 1,273.0 million for the six-month period ended June 30, This increase was primarily due to the 7.8% increase in data, internet and local services revenues. Long Distance Services. Our long distance gross profit increased 1.3%, or Ps. 2.8 million, to Ps million for the six-month period ended June 30, 2011 from Ps million for the six-month period ended June, This increase was primarily due to the 15.7% increase in revenue per minute. Our gross margin, defined as gross profit as a percentage of total revenues, was 69.0% for the six-month period ended June 30, 2011 as compared to 66.4% for the six-month period ended June 30, A reconciliation of our operating income to gross profit is provided below as of June 30, 2010 and Six-month period ended June 30, (in millions of nominal Pesos) Gross Profit 1, ,588.8 Administration, selling and other operating expenses (784.2) (801.3) Depreciation and amortization (425.7) (422.1) Operating Income Administration, selling and other operating expenses Administration, selling and other operating expenses increased 2.2%, or Ps million, to Ps million for the six-month period ended June 30, 2011 from Ps million for the six-month period ended June 30, 2010, primarily as a result of higher personnel expenses. For the six-month periods ended June 30, 2011 and 2010, administration, selling and other operating expenses represented 34.8% and 35.0% of total revenues, respectively. Depreciation and amortization Depreciation and amortization amounted to Ps million for the six-month period ended June 30, 2011, compared to Ps million for the six-month period ended June 30, Operating income Operating income increased 30.3%, or Ps million, to Ps million in the six-month period ended June 30, 2011 from Ps million for the six-month period ended June 30, This increase was primarily due to a Ps million increase in gross profit. 5

6 Comprehensive financial result ˆ200FCwd2et!P%vMwSŠ 200FCwd2et!P%vMw FBUAC NER dormr0nd 25-Aug :57 EST TX 6 2* During the six-month period ended June 30, 2011, our comprehensive financial loss was Ps million compared to a Ps million loss for the six-month period ended June 30, The following table sets forth our comprehensive financial results for the periods under review: Our interest expense decreased by Ps million, to Ps million, for the six-month period ended June 30, 2011 from Ps million for the six-month period ended June 30, This decrease was driven by the appreciation of the Peso against the U.S. dollar during the last twelve months, since our total debt is U.S. dollar-denominated, coupled with a decrease in our total debt outstanding during the six-months period ended June 30, 2011 compared to the same period of Interest income amounted to Ps. 3.2 million for the six-month period ended June 30, 2011, and for the six-month period ended June 30, Exchange gain for the six-month period ended June 30, 2011 was Ps million compared to an exchange gain of Ps million for the six-month period ended June 30, We record a foreign exchange gain or loss with respect to U.S. dollardenominated net monetary position of assets and liabilities when the Peso appreciates or depreciates in relation to the U.S. dollar. Our U.S. dollar-denominated monetary liabilities exceeded our U.S. dollar-denominated monetary assets during the six-month periods ended June 30, 2011 and We recorded a foreign exchange gain during the six-month period ended June 30, 2011 as a result of a 4.2% appreciation of the Peso against the U.S. dollar, while during the six-month period ended June 30, 2010 the Peso appreciated 3.1% against the U.S. dollar. Our principal foreign currency fluctuation risk involves changes in the value of the Peso relative to the U.S. dollar. In past years, we have considered alternatives to manage this risk, including the use of hedging instruments, in order to minimize the impact on our cash flow due to the exchange rate fluctuation of the Peso to the U.S. dollar. In October 2010, we entered into a currency hedge to minimize the effects of the Peso to U.S. dollar exchange rate fluctuation. We sought to hedge the interest payment of our senior notes due 2014 through two foreign exchange forward contracts. Each of these forward contracts was in an amount of U.S.$11.75 million at an exchange rate of Ps per U.S.$1.00 and Ps per U.S.$1.00 in February 2011 and August 2011, respectively. The effect of the forward contract that matured in February 2011 was negative, and for the six-month period ended June 30, 2011 amounted to Ps. 5.0 million. In addition, we have a U.S. dollar-denominated lease contract in which the dollar currency embedded in the host lease contract is considered an embedded derivative for accounting purposes. For the six-month period ended June 30, 2011, the effect of this embedded derivative was positive and amounted to Ps. 0.5 million. This contract is evaluated on a monthly basis. Other Expense, Net Six-month period ended June 30, (in millions of nominal Pesos) Interest expense (192.1) (166.2) Interest income Exchange gain, net Gain/(loss) on derivative financial instruments 0.6 (4.5) Comprehensive financial result, net (88.8) (43.0) Other expense, net increased Ps million, to Ps million in the six-month period ended June 30, 2011 from Ps. 8.6 million during the six-month period ended June 30, This increase was primarily due to the disposal of obsolete fixed assets. Income and IETU We and our subsidiaries, Servicios Alestra and Alestra Telecomunicaciones Inalámbricas, are required to pay the greater of the income tax or the flat tax (Impuesto Empresarial a Tasa Única, or IETU ), which are computed separately for each entity. We participate in the tax consolidation of ALFA, S.A.B. de C.V. ( Alfa ), our holding 6

7 ˆ200FCwd2euDmsb1wnŠ 200FCwd2euDmsb1w FBUAC NER mandb0nd 29-Aug :15 EST TX 7 2* company. For the six-month period ended June 30, 2011, we recorded an income tax provision using an income tax effective rate of 22.7%, compared to an income tax effective rate of (2.2)% for the six-month period ended June 30, For the six-month period ended June 30, 2011, our income tax is higher than our IETU tax; accordingly, we have not recognized any IETU in our consolidated income statements. In accordance with the interpretation published by the Mexican Board of Research and Development of Financial Reporting Standards ( CINIF ) on December 21, 2007, with respect to the accounting effects of the IETU, and based on financial and tax projections, we have determined that we will continue to pay regular income tax in the foreseeable future. As a result, we did not record any deferred IETU taxes as of June 30, Net Income During the six-month period ended June 30, 2011, we recorded a net income of Ps million compared to a net income of Ps million during the six-month period ended June 30, 2010, an increase of Ps million, or 23.6%. The increase in net income was primarily explained by an increase in operating income of Ps million coupled with an increase in exchange gain of Ps million in the six-month period ended June 30, 2011 when compared to the six-month period ended June 30, 2010; partially offset by an income tax expense of Ps million during the six-month period ended June 30, 2011 compared to an income tax benefit of Ps. 4.0 million during the six-month period ended June 30, Current Liquidity As of June 30, 2011, December 31, 2010 and June 30, 2010, we had Ps million, Ps million and Ps million of unrestricted cash available, respectively. The reduction in cash balance during the first six-months of 2011 is mainly explained by US$ 18.6 million debt pre-payment with internally generated funds. Our unrestricted cash balance consists of cash and temporary investments with original maturities of three months or less. Our treasury policy is to invest in highly liquid temporary cash investments issued by the U.S. and Mexican governments, major U.S. and Mexican banks and corporations with high credit ratings. As of June 30, 2011, we had cash of Ps million and temporary investments of Ps million, of which Ps million were in Peso-denominated instruments and Ps million in U.S. dollar-denominated instruments. In our opinion, our cash and cash equivalents balance is sufficient for our present requirements. As of June 30, 2011, December 31, 2010 and June 30, 2010, our ratio of current assets to current liabilities was 1.01x, 0.97x and 0.93x, respectively. Our ratio of current assets to current liabilities as of June 30, 2011 includes the corresponding amortization of our bank facility and our vendor facilities, which is described below. On September 8, 2009, a trust was created by us, Telmex, and BBVA Bancomer as a trustee, to guarantee the payment of interconnection services. As of June 30, 2011, the trust balance was US$ 33.9 million, registered as cash and cash equivalents in our financial statements. Capital expenditures during the six-month period ended June 30, 2011 amounted to Ps million, compared to Ps million invested in the six-month period ended June 30, Our capital expenditure program includes investments to expand our network, develop new services to customers, increase data center capacity, and also to provide last mile and direct access to connect customers to our network. As of the date of this report, our capital expenditure program is proceeding according to schedule. 7 As of June 30, 2011 As of December 31, 2010 As of June 30, 2010 (in millions of nominal Pesos, excluding ratios) Unrestricted cash balance Current ratios (times) 1.01x 0.97x 0.93x

8 ˆ200FCwd2euKJ7&ew<Š 200FCwd2euKJ7&ew FBUAC NER hryse0nd 30-Aug :38 EST TX 8 7* Indebtedness As of June 30, 2011, December 31, 2010 and June 30, 2010, our total debt amounted to US$ million, US$ million and US$ million, respectively. Total debt as of June 30, 2011 includes: % senior unsecured notes due 2014 in an amount of US$ million; a bank facility in an amount of US$ 10.0 million; and vendor facilities in an aggregate amount of US$ 7.9 million. As of June 30, 2011, we had outstanding US$ million aggregate principal amount of our % senior notes due 2014 (the senior notes ), which pay interest semiannually in cash in arrears on February 11 and August 11. The principal amortization is payable at maturity on August 11, On September 27, 2010, we signed a committed revolving facility and a term loan agreement with Comerica Bank for US$ 20 million and US$ 10 million, respectively (together, the Comerica Bank credit facility ). The committed revolving facility bears interest at a threemonth adjusted LIBOR rate plus 3.50%, payable on a quarterly basis, and is effective until December 31, As of June 30, 2011, the committed revolving facility remained unused. The term loan bears interest at a three-month adjusted LIBOR rate plus 3.75%, payable on a quarterly basis. The principal is payable in four equal installments in March 2012, June 2012, September 2012 and December As of June 30, 2011, we had a vendor facility with an outstanding balance of US$ 4.0 million with Cisco Systems Capital Corporation ( Cisco ), which pays principal and interest on a monthly basis. This loan matures on July 6, As of June 30, 2011, we had a vendor facility with an outstanding balance of US$ 2.1 million with Hewlett-Packard Operations México S. de R.L. de C.V. ( HP ), which pays principal and interest on a monthly basis. This loan matures on February 28, As of June 30, 2011, we had a vendor facility with an outstanding balance of US$ 1.8 million with Huawei Technologies de México, S.A de C.V, which pays principal and interest on a quarterly basis and matures in December The senior notes and Comerica Bank credit facility contain customary covenants with which, as of June 30, 2011, we are in full compliance. Subsequent Events AT&T Transactions On July 12, 2011, Alfa terminated the joint venture agreement entered into between AT&T Telecom México, Inc. ( AT&T México ), Alfa and us, as amended on November 30, 2005, and the equity purchase agreement entered into between AT&T Corp. ( AT&T ), AT&T México, Alfa and us on April 14, 2011 and completed the acquisition of AT&T México s 49% equity interest in us after receiving approval from regulatory authorities in Mexico. Following the closing of these transactions, which were originally announced in April 2011, Alfa is now the sole shareholder of Alestra. In addition, on July 12, 2011, the Company entered into the nodes purchase agreement with AT&T, AT&T México and Alfa, pursuant to which AT&T México purchased from us the telecommunications nodes and customer equipment (the Nodes ) required for the provision of AT&T Global Services in Mexico (the Nodes Purchase Agreement ). On July 12, 2011, we entered into an Equipment Lease Agreement with AT&T México pursuant to which we lease from AT&T México the Nodes required for the provision of AT&T Global Services in Mexico (the Equipment Lease Agreement ) until December 31, The Equipment Lease Agreement is subject to early termination if AT&T acquires the necessary licenses and regulatory approvals to offer, directly and independently from us, AT&T Global Services within Mexico, with AT&T México. Upon the termination of the Equipment Lease Agreement, (i) we and AT&T México will terminate the brand name use agreement between AT&T and us, the AT&T Global Network Cooperation Agreement (the AGN Agreement ) prior to its June 30, 2013 expiration date and (ii) we will enter into several commercial agreements pursuant to which we will provide certain telecommunication services to AT&T México. After the termination of the AGN Agreement, we will no longer provide AT&T Global Services in Mexico and will be required to cease using any of AT&T s intellectual property. Dividends On July 6, 2011 and July 8, 2011, we paid a US$ 10 million dividend, the second installment of a US$ 15 million dividend declared in a shareholders meeting held on December 21, In addition, in a general ordinary meeting held on July 19, 2011 the shareholders declared and we paid a dividend of US$9 million. 8

9 ˆ200FCwd2g2h%1ki6vŠ 200FCwd2g2h%1ki6 nerdoc NER shaup0ap 25-Aug :43 EST TX 9 1* HTM IFV 0C UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As of June 30, 2011 and for the six months ended June 30, 2010 and 2011 Unaudited Consolidated Balance Sheets as of December 31, 2010 and June 30, 2011 F-2 Unaudited Consolidated Statements of Income for the Periods of Six-Months and Three-Months Ended June 30, 2010 and 2011 F-3 Unaudited Consolidated Statements of Changes in Stockholders Equity for the Six-Months Ended June 2010 and 2011 F-4 Unaudited Consolidated Statements of Cash Flow for the Six Months Ended June 30, 2010 and 2011 F-5 Notes to Unaudited Condensed Consolidated Financial Statements F-6

10 START PAGE nerdoc NER shaup0ap ˆ200FCwd2g2h$WbG6CŠ 200FCwd2g2h$WbG6 25-Aug :42 EST ALESTRA, S. DE R. L. DE C. V. AND SUBSIDIARIES Subsidiaries of Alfa S. A. B. de C. V. UNAUDITED CONSOLIDATED BALANCE SHEETS (Amounts are expressed in thousands of adjusted nominal Mexican Pesos) TX 10 1* HTM IFV 0C The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F-2 December 31, 2010 Unaudited June 30, 2011 Assets CURRENT ASSETS: Cash and cash equivalents Ps 864,431 Ps 818,449 Trade receivables, net of allowance for doubtful accounts of Ps 39,351 in December 31, 2010 and Ps 45,731 in June 30, , ,299 Due from affiliates and other related parties 7,974 8,574 Other receivables 104,924 82,791 Prepaid expenses 41,213 81,334 Other current assets 28,397 12,446 Total current assets 1,539,969 1,569,893 NON CURRENT ASSETS: Property and equipment, net (Note 3) 5,077,968 4,958,536 Deferred charges and other assets, net 276, ,547 Deferred income tax (Note 7) 198, ,585 Prepaid expenses 49,210 42,500 Total non current assets 5,602,220 5,460,168 Total assets Ps 7,142,189 Ps 7,030,061 Liabilities and stockholders equity CURRENT LIABILITIES: Accounts payable to Teléfonos de México, S.A.B de C.V. and other carriers Ps 496,646 Ps 533,505 Other suppliers 265, ,063 Bank loans, notes payable and capital leases (Note 4) 216, ,169 Due to affiliates and other related parties 9,790 20,013 Dividends payable 123, ,389 Interest payable 118, ,289 Other accounts payable and accrued expenses 354, ,560 Total current liabilities 1,586,292 1,552,988 LONG-TERM LIABILITIES: % Senior notes due 2014 (Note 5) 2,471,420 2,367,780 Bank loans, notes payable and capital leases (Note 4) 309, ,537 Employee s benefits 106, ,948 Total liabilities 4,474,395 4,137,253 STOCKHOLDERS EQUITY: Contributed stock 1,394,971 1,394,971 Retained earnings 1,272,865 1,497,880 Total shareholders equity of Alestra 2,667,836 2,892,851 Non controlling interest (42) (43) Total stockholders equity 2,667,794 2,892,808 CONTINGENCIES AND COMMITMENTS (Note 8) Total liabilities and stockholders equity Ps 7,142,189 Ps 7,030,061

11 START PAGE FBUAC NER wernm0nd ˆ200FCwd2eu9CJYowAŠ 200FCwd2eu9CJYow 29-Aug :25 EST ALESTRA, S. DE R. L. DE C. V. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (Amounts are expressed in thousands of adjusted nominal Mexican Pesos) TX 11 5* The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F-3 Three months ended June 30 Six months ended June 30, REVENUES Long distance services Ps 275,321 Ps 237,968 Ps 556,611 Ps 484,342 Data, internet and local services 851, ,559 1,686,232 1,818,291 1,126,499 1,141,527 2,242,843 2,302,633 OPERATING EXPENSES : Cost of services (excluding depreciation and amortization): Long distance services (168,493) (127,615) (339,287) (264,182) Data, internet and local services (210,222) (214,128) (413,265) (449,665) (378,715) (341,743) (752,552) (713,847) Gross profit 747, ,784 1,490,291 1,588,786 Administration, selling and other operating expenses (392,848) (404,823) (784,163) (801,271) Depreciation and amortization (213,503) (210,319) (425,687) (422,143) Operating income 141, , , ,372 COMPREHENSIVE FINANCIAL RESULT: Interest expense (100,042) (83,208) (192,142) (166,184) Interest income 1,781 1,949 3,166 3,231 Exchange gain (46,025) 37,283 99, ,482 Gain (loss) on derivative financial instruments (4,473) (144,025) (43,734) (88,755) (42,944) OTHER EXPENSE, NET (1,504) (10,713) (8,552) (23,845) Gain before the following provisions for income tax (4,096) 130, , ,583 Consolidated Income tax (28,689) (29,694) 4,064 (67,130) Consolidated net income (Ps 32,785) Ps 100,501 Ps 187,198 Ps 231,453 Net loss attributable to non controlling interest (1) (1) (1) (1) Net income attributable to total stockholders of Alestra (Ps 32,786) Ps 100,500 Ps 187,197 Ps 231,452

12 ˆ200FCwd2eu0k9c3wSŠ 200FCwd2eu0k9c3w FBUAC NER varsl0nd 26-Aug :39 EST TX 12 3* ALESTRA, S. DE R. L. DE C. V. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Amounts are expressed in thousands of adjusted nominal Mexican Pesos) Capital stock Fixed Variable Restatement of Capital Stock Accumulated (deficit) income Effects of derivative financial instruments The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. F-4 Retained earnings Stockholder equity of Alestra Non controlling interest Total Stockholders Equity Balance at January 1, 2010 Ps300 Ps1,181,046 Ps 213,625 Ps Ps 918,749 Ps2,313,720 Ps 1 Ps2,313,721 Changes in 2010: Net income 187, , ,198 Other 4,020 4,020 4,020 Comprehensiva income 191, , ,218 Balance at June, 30, 2010 Ps300 Ps1,181,046 Ps 213,625 Ps Ps1,109,967 Ps2,504,938 Ps 1 Ps2,504,939 Balance at January 1, ,181, ,625 (829) 1,273,694 2,667,836 (42) 2,667,794 Changes in 2011: Net income 231, ,452 (1) 231,451 Effect of derivative financial instruments (6,437) (6,437) (6,437) Comprehensive income (6,437) 231, ,015 (1) 225,014 Balance at June 30, 2011 Ps300 Ps1,181,046 Ps 213,625 (Ps 7,266) Ps1,505,146 Ps2,892,851 (Ps 43) Ps2,892,808

13 START PAGE FBUAC NER dormr0nd ˆ200FCwd2eu0m0BvQÇŠ 200FCwd2eu0m0BvQ 26-Aug :42 EST ALESTRA, S. DE R. L. DE C. V. AND SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW (Amounts are expressed in thousands of adjusted nominal Mexican Pesos) TX 13 3* The accompanying notes are an integral part of these unaudited consolidated financial statements. F-5 Six months ended June 30, Operation activities: Income before income tax Ps 183, ,583 Items relating to investing activities: Depreciation and amortization 425, ,143 Cost related to seniority premiums and pension plans 9,533 8,320 Interest income (3,166) (3,231) Derivative financial instruments (605) 4,473 Gain on sale of equipment 413 3,003 Items relating to financing activities: Interest expense 192, ,184 Exchange gain (99,616) (124,482) Other, net 8,026 11,657 Subtotal 715, ,650 Increase in accounts receivable and other current assets (111,784) (45,889) Increase in suppliers, accounts payable and other current liabilities 57,089 60,813 Income tax paid (106,895) (106,822) Operating activities net cash flows 553, ,752 Investing activities: Interest received 2,906 3,658 Acquisition of property and equipment (266,114) (264,226) Acquisition of deferred charges and other assets (23,136) (12,602) Investing activities (286,344) (273,170) Excess in cash to be applied in financing activities net cash flows 267, ,582 Financing activities: Proceeds from bank loans, notes payable and capital leases 85,749 Interest paid (196,419) (159,906) Payments of bank loans, notes payable and capital leases (88,947) (293,478) Payments relating to settlements of derivative financial instruments (4,979) Financing activities net cash flows (199,617) (458,363) Net cash increasing cash and cash equivalents 67,997 (36,781) Adjustments to cash flow as a result of changes in exchange rates (17) (9,201) Cash, cash equivalents and restricted cash at beginning of year 635, ,431 Cash and cash equivalents and restricted cash at year end Ps 703,611 Ps 818,449

14 START PAGE nerdoc NER shaup0ap ˆ200FCwd2g2h$gDu6ÉŠ 200FCwd2g2h$gDu6 25-Aug :43 EST ALESTRA, S. DE R. L. DE C. V. AND SUBSIDIARY Subsidiaries of Alfa S. A. B. de C. V. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts are expressed in thousands of adjusted nominal Mexican Pesos) TX 14 1* HTM IFV 0C 1. INCORPORATION AND ACTIVITY OF THE COMPANY Alestra, S. de R. L. de C. V. ( Alestra ), is a Mexican company with limited liability and variable capital, incorporated on October 13, 1995, as a joint venture between Onexa, S. A. de C. V. ( Onexa ) (51%) and AT&T Telecom México, Inc. ( AT&T ) (49%). Alestra s business consists of the installation and operation of a public telecommunications network in Mexico, offering long distance telephone services and data, internet and local services. In a general extraordinary meeting held on October 2, 2007, the stockholders approved the merger of Onexa into Alfa, S. A. B. de C. V., which became effective as of March 31, As a result of this merger, Alfa owns directly 51% of the shares of Alestra. Alestra and its subsidiaries Servicios Alestra, S. A. de C. V. ( Servicios Alestra ) and Alestra Telecomunicaciones Inalámbricas, S. de R. L. de C. V. ( ATI ) are collectively referred to as the Company. Alestra does not have any direct employees and all services required are provided by Servicios Alestra. 2. PREPARATION OF INTERIM FINANCIAL STATEMENTS a. Basis of presentation and disclosures The unaudited condensed consolidated financial statements of Alestra have been prepared in accordance with Financial Reporting Standards applicable in Mexico ( Mexican FRS ) as promulgated by the Mexican Financial Reporting Standards Board ( CINIF ). The unaudited condensed consolidated financial statements are expressed in Mexican Pesos (functional and reporting currency) denoted by the symbol Ps.. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by Mexican FRS. The information included in the condensed consolidated financial statements is unaudited but reflects all adjustments (consisting only of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of these interim periods are not necessarily indicative of results for the entire year. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes as of December 31, The unaudited condensed consolidated financial statements include those of Alestra and its subsidiaries, Servicios Alestra and ATI, of which Alestra holds 99% and 91% of their capital stock, respectively. All significant balances and transactions have been eliminated. F-6

15 b. Estimates ˆ200FCwd2eu9CSZWQ4Š 200FCwd2eu9CSZWQ FBUAC NER wernm0nd 29-Aug :27 EST TX 15 2* The preparation of financial statements in conformity with Mexican FRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and assumptions include certain international long distance services revenues and expenses, the allowance for doubtful accounts, deferred income tax, provisions and employees benefits. c. Recognition of the effects of inflation The provisions of the Mexican FRS B-10 specify that as of 2008, the Mexican economy is not considered an inflationary environment, since there has been a cumulative inflation below 26% in the last three years (which is the established limit to define an economy as inflationary). Therefore, as of January 1, 2008, the Company was required to discontinue the recognition of the inflation effects in the financial information. Consequently, the financial statements as of March 31, 2010 and 2011 are stated in adjusted nominal Mexican pesos as they include cumulative inflation effects on the financial information recognized up to December 31, d. New Financial Reporting Standards During December 2010 and 2009, the CINIF issued a series of Mexican FRS, which became effective as of January 1, The adoption of these Mexican FRS and interpretation did not have any significant impact on the financial information presented. Mexican FRS B-5 Financial Information by Segments. It establishes the general standards to disclose financial information by segments. Additionally, it allows the users of such information to analyze the entity from the same point of view as management do and requires to present financial information by segment consistently with its financial statements. With this standard, Bulletin B-5 Financial Information by Segment will be effective up to December 31, Mexican FRS B-9 Financial Information at Interim Dates. It establishes the guidance for the determination and presentation of financial information at interim dates which, among other things requires the presentation of the statement of changes in stockholders equity and of cash flows which were not required by former Bulletin B-9 Financial Information at interim dates (effective up to December 31, 2010). Mexican FRS C-4 Inventory. Of retrospective application and establishes the particular standards of valuation, presentation and disclosure for the initial and subsequent recognition of inventory. Additionally it removes the direct cost method as an allowed valuation system and the inventory cost allocation formula denominated as Last In First Out (LIFO). With this standard, Bulletin C-4 Inventory remains effective up to December 31, Mexican FRS C-5 Advanced payments. Requires retrospective application and establishes, among other things, the particular standards of valuation, presentation and disclosure related to advanced payments line item. It also establishes that advanced payments for the purchase of inventory, real estate, machinery and equipment should be presented in the advanced payments line item and not in inventory or property, machinery and equipment as previously required. Additionally it establishes that advanced payments related to the acquisition of goods should be presented in the balance sheet in attention to the intended item classification, either in current or non-current assets. With this standard, Bulletin C-5 Advanced payments remains effective up to December 31, F-7

16 ˆ200FCwd2eu0r5e1wqŠ 200FCwd2eu0r5e1w FBUAC NER wernm0nd 26-Aug :53 EST TX 16 3* Mexican FRS C-6 Property, plant and equipment. Requires prospective application (except on disclosure aspects), and establishes, among other things, the particular standards of valuation, presentation and disclosure related to property, plant and equipment. It also establishes: a) that property, plant and equipment used to develop or maintain biological and extractive industries assets be under its scope, and b) the mandatory depreciation of representative components of property, plant and equipment, as opposed to depreciating the remaining asset as a single component. This Mexican FRS became effective as of January 1, 2011, with exception of the changes arising from the segregation of its components and which have a useful life clearly different to the main asset. In this case, and for entities which have not performed such segregation, the applicable disposition will become effective for periods beginning January 1, With this standard, Bulletin C-6 Property, plant and equipment remains effective up to December 31, Mexican FRS C-18 Liabilities associated to assets retirement and environmental restoration. Requires retrospective application and establishes, among other things, the particular standards for initial and subsequent recognition of a provision relative to liabilities associated to property, plant and equipment component retirements as well as the requirements to be considered for valuation of a liability associated to a component retirement and the disclosures that should be presented by an entity when it has a liability associated to a component retirement. e. Reclassifications Certain reclassifications of amounts previously reported have been made to the consolidated statement of cash flow for the period ended June 30, 2010 to maintain consistency and comparability between periods presented, as shown below: Originally reported Reclassification June 30, 2010 Operating activities net cash flows Other, net Ps 2,995 Ps 5,031 Ps 8,026 Exchange gain (94,585) (5,031) (99,616) Increase in accounts receivable and other current assets (218,679) 106,985 (111,785) Income tax paid 106,985 (106,985) Operating activities net cash flows (Ps 310,269) Ps (Ps 310,269) Financing activities net cash flows Proceeds from bank loans, notes payable and capital leases Ps Ps 85,749 Ps 85,749 Payments of bank loans, notes payables and capital leases (3,198) (85,749) (88,947) (Ps 3,198) Ps (Ps 3,198) 3. PROPERTY AND EQUIPMENT, NET As of December 31, 2010 and June 30, 2011, property and equipment net, consists of the following: Buildings Ps ,817 Ps 236,049 Furniture, fixtures and other Hardware equipment 233, , , ,900 Transportation equipment 33,044 30,816 Telephone network 10,243,017 10,359,953 Leasehold improvements 67,583 67,888 Billing and customer care software 562, ,253 Accumulated depreciation and amortization 11,718,265 11,839,825 (7,101,556) (7,372,404) Land 4,616,709 4,467, , ,039 Constructions in progress 296, ,076 Total Ps 5,077,968 Ps 4,958,536 Amortization of billing and customer care software charged to income amounted to Ps3,566 and Ps2,722 for the periods ended June 30, 2010 and 2011, respectively. Depreciation charged to income, not including amortization of the billing and customer care software mentioned above, was Ps380,675 and Ps372,189 for the periods ended June 31, 2010 and 2011, respectively. F-8

17 4. BANK LOANS, NOTES PAYABLE AND CAPITAL LEASES ˆ200FCwd2eu0g5RkwFŠ 200FCwd2eu0g5Rkw FBUAC NER cokea0nd 26-Aug :34 EST TX 17 2* As of December 31, 2010 and June 30, 2011, bank loans, notes payable and capital leases consist of the following: 5. SENIOR NOTES On August 11, 2009 the Company performed a debt offering by issuing unsecured senior notes for a total amount of US$200 million. The senior notes bear interest at annual rate of % payable semi-annually in cash on February and August of each year with a maturity on August 11, 2014 ( % Senior Notes ). The % Senior Notes principal will be paid at maturity and is presented as long-term in the balance sheet. The proceeds obtained in the issuance of the % Senior Notes were used to refinance the Company s 8% Senior Notes due June 2010 ( 8% Senior Notes ). On October 7, 2009, the Company filed a registration statement on Form F-4 in order to register its offer to exchange its outstanding % Senior Notes due 2014 with new notes that have been registered under the U.S. Securities Act of 1933, as amended. This registration statement became effective on January 6, F Bank loan obtained from Comerica Bank for an amount of US$10 million (1) Ps 123,571 Ps 118,389 Promissory notes to Cisco Systems Capital Corporation for an amount of US$37.2 million (2) 238,243 47,475 Promissory notes to Hewlett Packard Operations de México, S. de R. L. de C. V., for an amount of US$18.8 million. (3) 136,282 25,149 Promissory notes to Huawei Tecnologies de México, S. A. de C. V. for an amount of US$3.5 million. (4) 28,798 20, , ,706 Current portion of bank loans, notes payable and capital leases (216,957) (104,169) Long term debt Ps 309,937 Ps 107,537 (1) On September 27, 2010 the Company signed a new loan agreement with Comerica Bank ( Comerica ) for US$10 million bearing interest at 3-month adjusted LIBOR rate plus 3.75%. Interest are payable quarterly and principal is payable in four equal installments of US$2.5 million in March 31, 2012, June 30, 2012, September 30, 2012 and December 31, This loan agreement contains various covenants which, as of June 30, 2011, and the date of the issuance of the financial statements, the Company is in full compliance. (2) The Company issued ten promissory notes for a total amount of US$37.2 million to acquire goods with its supplier Cisco Systems Capital Corporation. Each note has a maturity of 36 months at an annual interest rates between 5.15% and 5.67%. However, as of May 30, 2011, 9 promissory notes were paid in full, the remaining balance amount US$4.0 million with a maturity on July 6, 2013, bearing interest at an annual interest rate of 5.15%. (3) From October 1, 2008 to March 31, 2010, the Company signed five promissory notes with Hewlett Packard Operations de México, S. de R. L. de C. V. ( HP ), for the acquisition of goods for a total amount of US$18.8 million. The payments will be made on a monthly basis in 48 installments and annual interest rates between 5.21% and 7.082%. However, as of June 14, 2011, 9 promissory notes were paid in full, the remaining balance amount US$2.1 million with a maturity on February 28, 2014, bearing interest at an annual interest rate of 5.21%. (4) On January 1st, 2010, the Company signed a promissory note with Huawei Technologies de México S. A. de C. V. ( Huawei ), for the acquisition of goods for a total amount of US$3.5 million. The payments will be made quarterly at an annual interest rate of 5.50%. As of June 30, 2011, the amount outstanding was US$1.8 million.

18 ˆ200FCwd2g2h$n4K6[Š 200FCwd2g2h$n4K6 nerdoc NER shaup0ap 25-Aug :43 EST TX 18 1* HTM IFV 0C The costs and expenses, including the placing of premiums and discounts of this new issuance, which at December 31, 2009 amounted to Ps66,166 (US$5.1 million), will be amortized over the life of the % Senior Notes. The unamortized costs and expenses of the 8% Senior Notes due 2010, amounting to Ps19,229 at December 31, 2009, were charged to income for the year and are presented in the statement of operations as other income (expense). The Company may redeem, at any time, the % Senior Notes, in whole but not in part, by paying the greater of 100% of the principal amount of such notes and the sum of the present value of each remaining scheduled payment of principal and interest discounted to the redemption date on a semi-annual basis at the Treasury Rate (as defined in the indenture for the % Senior Notes) plus 50 basis points, in each case plus accrued and unpaid interest. In addition, prior to or on August 11, 2012, the Company may redeem up to 35% of the original principal amount of the % Senior Notes with the net proceeds from certain equity offerings by the Company, at a price of % of the aggregate principal amount thereof, plus accrued and unpaid interest. In the event of a change in the Company s control structure, for example in the case of change of the interest ownership partners of the Company and with certain exceptions, the holders of the % Senior Notes are entitled to demand that the Company repurchase the notes in cash, at a price equal to 101% of the principal amount plus unpaid accrued interest. The indenture for the % Senior Notes and other credit agreements contain various debt covenants including limitations on the sale of assets and affiliate transactions, among others. In addition, these covenants require the Company to have a certain leverage ratio prior to being able to enter into additional debt transactions. As of June 30, 2010 and 2011 the Company is in compliance with all required covenants. 6. EMPLOYEES BENEFITS An analysis of the net periodic pension cost by plan type is presented as follows: Pension Plan June 30, Seniority Premium June 30, F-10 Indemnities June 30, Other retirement benefits June 30, Total June Net cost of the period: Labor cost of the current service Ps1,143 Ps 923 Ps 83 Ps 91 Ps1,636 Ps1,698 Ps 6 Ps 47 Ps2,868 Ps2,759 Financial cost 3,484 2, ,734 1, ,313 4,166 Net actuarial earning or loss Labor cost of past service (329 ) (320 ) ,511 1,511 1,204 1,213 Total Ps4,375 Ps3,097 Ps252 Ps243 Ps4,881 Ps4,667 Ps 25 Ps313 Ps9,533 Ps8,320